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Author Topic: How long to keep your strategy running before you decide is not working anymore  (Read 11986 times)

Offline jb

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I have seen many accounts out there with good profit at the beginning lets say one month with 30% account increase, and then you see account starting to decrease to your starting capital. At what point do you start taking precaution of your gain?
Here is one example: http://www.myfxbook.com/members/fmonera/robinvol-20-risk-3/482006

Account was in 15% gain at some point to be -20% now Do you keep it running and risk more or do you stop and rethink your strategy?

We all know that in this market we are going to have loses the question is what is considered as healthy loss?
Maintain a positive attitude no matter how much you lose!

Online grgr

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This is a good question.

The problem with your example is that it worked for longer than a month and even reached the average return at one time. EA's generally should have Worst Case Scenario based on the historical drawdown and till this point you should keep risking with the EA.

But you're right, RV is currently going down like a rock to the WCS, and most of the systems i've seen so far are simply working for some time and then losing profits and initial capital.
FOREX - the only one who is earning on this business is the broker. Biggest scam ever over the whole world. Most brokers don't even pass your trades to the market, because they simply know that everyone will lose, so they keep the losses for themselves.

Offline jb

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I think a lot of people including myself are struggling with this topic. Experienced trader might have feel for it but even them should be basing their theory on something and that something is the key.
Traders could be on either side of the theory:
  • Thinking they made 30% profit lets say in 2 months, now they are on losing streak and lost 25%, would you bang your had against the wall and keep on going hopping you are going to recover?
  • Scrap your strategy, keep that 5% until you figure out new one?
Maintain a positive attitude no matter how much you lose!

Online grgr

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Every strategy must face a drawdown, and it's better to see how a strategy is working with it, rather than looking for systems that works for 2 months and then leave it just because it started to generating losses.

The bigger problem is when you join at the point "after 30% profit". You will start with losses, and you can't keep that 5% profit.

This together makes the profitability for longer term impossible. From this 5% profit you will have to cover losses of other strategies and strategies costs (they're not free).

I've got a feeling, right now, that people who are profitable here for more than a year, are just lucky and nothing else. The situation is a bit different on manual traders, but even there, try to find a long-term trader who will generate you fortune (following his signals).
FOREX - the only one who is earning on this business is the broker. Biggest scam ever over the whole world. Most brokers don't even pass your trades to the market, because they simply know that everyone will lose, so they keep the losses for themselves.

Offline jb

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In regards to manual traders... let say you are profitable for 3 months with 30% increase in your account and you start experiencing bad losses you have not encountered before... Lets say you lose 20% of your account in matter of 3 weeks... would you say is safe to continue with the same strategy?

Sorry if I am boring you ... I am just trying to understand this a bit more and to see how other people are handling this  ;)
Maintain a positive attitude no matter how much you lose!

Online grgr

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I think a good trader would spend more than 3 months on demo trading. He would also stick to one strategy, made by himself, or someone else. After months of testing it he would know how much he can lose. There's no one answer for your question, everything needs time, experience, and studying.

But when you ask about following traders.. I prefer a group of traders, who seems to know what they're doing rather than risking everything with one trader and short live data history. They should also tell you how much you can lose following them.
Obviously it's hard to find such a group.

Obviously the losses are higher if the gains are too. If the strategy is good, and it is not making one trade per month i think it should be a slow process of losses, so you should realize if it stopped working already. At this point i would remind you about return/risk ratio. The higher, the better. For example if you set TP at 5 pips and SL at 50 pips, after 100 good trades, only 10 bad will wipe everything = you will lose your gains 10x faster than winning.
FOREX - the only one who is earning on this business is the broker. Biggest scam ever over the whole world. Most brokers don't even pass your trades to the market, because they simply know that everyone will lose, so they keep the losses for themselves.

Offline jeuro

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.
That is what back tests are for. We should know the answer before we start trading it.
Ideally, it is our own strategy. Then we know what are the weak point.

There is no way around. It is extremely  hard and a lot of work to find out from back test. Specially
if we use a lot of discretion. 

At the very least, we should spend a few bucks/quids and have someone to code the basic entry and exit
and ck .( with a 1/1 risk reward ratio in pips) if the main component of the strategy pulls out at least  40% of winners over the years.  That immediately will give you an opportunity to see the possible causes when the strategy fails.

With discretion, we can transform a 40% winners to a 60% . but if in back test is below 40%, then forget it. That strategy is no good and should never using even if make money a few weeks.

J

Offline goldenmember

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This is the problem with technical trading. You can backtest 'strategies' and see whether they work or not over a long time, or you can actually understand what is behind the market. Lots of technical traders blindly follow strategies- they don't know how much money they can make, what the drawdown is, what to do when they have a losing run etc etc. It is no way to trade at all, or to run a business. Imagine running a restaurant and asking the same question (how do I know when my restaurant is failing?) and reexamine your current thinking about forex trading. I have to say, most retail traders that I have spoken to have no idea what to do when they lose money (basically they have no idea how to run any type of business full stop).
Interested in investing with me? My website is at bestpammaccounts.com


Offline Valery

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If more than 2 drawdowns, I believe no further chances must be given to strategy. On average, it cannot operate successfully more than 1 year.

Offline dylan2510

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Referring to EA or discretionary ?

For discretionary price action strategies would be more flexible to changing market conditions.

Offline phibase

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The Phibase post linked below may be relevant/of interest to this discussion:

http://www.donnaforex.com/forum/index.php?topic=6642.msg295822#msg295822
 

Offline forexnerd

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60-90 Days maximum or until 20% capital flushed out.

Offline hybrid

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I would see for some times , If my strategy not works I have to choose some other way of trading . One can not make regular loss to be stuck on any specific strategy . A trader should save his money .

Offline Forexrider

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Testing the strategy for its profitability is a on going process, but one should be careful to implement or test the same along with ideal money and risk management such that even the losses gives the traders with more chances for trading. I would suggest to locate the loopholes of the trading strategy and improve the same for obtain better trading result.

Offline resistance

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If certain strategy is being updated regularly so I am sure if the strategy can be used all the time and if there is strategy which is not working anymore then the strategy is not used regularly by the traders. Traders need to try it on for about a month at least, it will be known well the performance and the result of trading when you're using the strategy. From the performance, traders can decide to keep on using the strategy or not.

 

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